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In the wake of the Google /Myspace $900 million deal where Google (GOOG) would be paying FIM (NWS) $900 million over 40 months, and Merrill Lynch coming out saying that the deal would get Google $225M back, I was asked by a few readers to rejig the original value of MySpace’s search business analysis.

Note that the $900 price tag is for all of FIM, at least the areas that matter, including sites like IGN, whereas this analysis is for MySpace only.

I decided to update the figures with MySpace’s most recent number and even include the contextual ad revenue, that is ads that are plastered on sites, they get much, much lower CTRs and average CPCs are much less, but on a garganthuan site like MySpace, it can add up. The thing is that over time, if the results are not up to par, advertisers opt out and that portion will reduce.

I could be wrong, but my guess is that despite News Corp.’s bravado, Yahoo! (YHOO) did the numbers and realized that over time, MySpace’s traffic is simply not all that profitable. People do not go there to search, so the “propensity to search” is low, and, the contextual ads are simply not clicked on.

Of course, I still give kudos to News Corp.’s team for getting Google to commit to such a staggeringly high number, even though per month, it’s only $22.5 month, a joke for a company with Google’s deep pockets and need to defend their position as search king.

Source: Did Google Overpay for Fox Interactive Media’s Search Business?